Accounting Ch. 10 Quiz

A bond that matures in installments is called a

serial bond

A bond with a face amount of $14,000 has a current price quote of 103.85. What is the bond's price?

$14,539

McCabe Corporation issued $550,000of 6% 10 year bonds. The bonds are dated and sold on 1/1/15. Interest payment dates are 1/1 and 7/1. The bonds are issued for $510,916 to yield the market interest rate of 7%. McCabe Corporation uses the effective interest method.

$33,000

McLennan Corporation issued $450,000 6% 10 year bonds. The bonds are dated and sold on 1/1/15. Interest payment dates are 1/1 and 7/1. The bonds are issued for $418,022 to yield the market interest rate of 7%

$421,220

Mckannah Corportion issed $100,000 of 13%, 5 year bonds payable on 1/1/14. The market interest rate when the bonds were issued was 13%. Interest is paid semiannually on 1/1 and 7/1. The first interest payment is 7/1/14. Using the effective interest amortization method, how much interest expense will Mckannah record on 7/1/14?

$6,266

Sunrise Company sells $400,000 of 11%, 15 year bonds for 84.2528 on 4/1/14. The market rate of interest on that day is 13.5%. Interest is paid each year on April 1. The entry to record the sales of the bonds on April 1 would be as follows:

Cash 337,011 Discount on Bonds Pay. 62,989 Bonds Payable 400,000

What type of account is Discount on Bonds Payable and what is its normal balance?

Contra liability; Debit

Accounts payable turnover for Big Blue, Inc., increased from 10 to 12 during 2014. Which of the following statements best describes what this means?

The company [aid its accounts payable more quickly in 2014, signaling a stronger liquidity position

Dart Corporations leverage ratio increased from 2.5 in 2013. Without looking at the financial statements, which statement best describes what may have occurred?

The company incurred new debt financing in 2014, but it may or may not have been more profitable

An end of period adjusting entry that debits Unearned Revenue most likely will credit

a revenue

The discount on a bond payable becomes

additional interest expense over the life of the bonds

Failure to accrue interest expense results in

an overstatement of net income and an understatement of liabilities

Truitt Corporation issued $400,000 of 3%, 10 year bonds payable on 1/1/14, for $367,297. The market interest rate when the bonds were issued was 4%. Interest is paid semiannually on 1/1 and 7/1. The first interest payment is 7/1/14. Truths journal entry to record the interest expense on 7/1/14, will include a

credit to Discount on Bonds Payable

An unsecured bond is a

denture bond

Is the payment of the face amount of a bond on its maturity date regarded as an operating activity, an investing activity, or a financing activity

financing activity

A contingent liability should be recorded in the accounts

if the amount can be reasonably estimated & if the related future event will probably occur

Amortizing the discount on bonds payable

increase the recorded amount of interest expense

The Discount on Bonds Payable account

is a contra account to Bonds Payable

What kind of account is Unearned Revenue?

Liability account

which of the following is not an estimated liability

allowance for bad debts

MacDonald COrporation issed $200,000 of 6.5% 10 year bonds. The bonds are dated and sold on 1/1/15. Interest payment dates are 1/1 and 7/1. The bonds are issued to yield the market interest rate of 7%. MacDonald Corporation uses the effective interest method.

$192,894

McAuliffe Corporation issued $300,000 of 6% 10 year bonds. The bonds are dated and sold on 11/15. Interest payment dates are 1/1 and 7/. The bonds are issued for $278,681 to yield the market interest rate of 7%. On the first semiannual interest payment date, 7/1/15, the company recorded $9,754 in interest expense and $754 in discount amortization. The interest payment is $9,000.

$280,215

Tennis Shoe Warehouse operates in a state with 6.5% sales tac. For convenience, Tennis Shoe Warehouse credits Sales Revenue for the total amount collected from each customer. If Tennis Shoe Warehouse fails to make an adjustment for sales taxes

net income will be overstated and liabilities will be understated

Panoramic Co. was organized to sell a single that carries a 45- day warranty against defects. Engineering estimates indicate that 5% of the units sold will prove defective and require an average repair cost of $25 per unit. During Panoramics first month of operations, total sales were 600 units; by the end of the month, 12 defective units had been repaired. The liability for product warranties at month end should be

$450

Spring Company sells $600,000 of 11%, 15 year bonds for $505,516 on April 1, 2014. The market rate of interest on that day is 13.5%. Interest is paid each year on April 1. Spring Company uses the straight line amortization method. The amount of interest expense for each year will be

$72,299

The carrying value of Bonds Payable equals

Bonds Payable - Discount on Bonds Payable

Sunrise Company sells $600,000 of 10% 10 year bonds for $548,090 on 4/1/14. The market rate of interest on that day is 11.5%. Interest is paid each year on April 1. Sunrise Company uses the straight line amortization method. Write the adjusting entry required at December 31,2014.

Interest Expense 48,893 Discount on Bonds Payable 3,893 Interest Payable 45,000

Interest Expense 27,973 Discount on Bonds Payable 5,473 Interest Payable 22,500

Interest Payable 22,500 Interest Expense 9,324 Discount on Bonds Pay 1,824 Cash 30,000

Bond carrying value equals Bonds Payable

Plus Premium on Bonds Payable and Minus Discount on Bonds Payable

The journal entry on the maturity date to record the payment of $1,500,000 of bonds payable that were issued at a $70,000 discount includes

a debit to Bonds Payable for $1,500,000

recording estimated warrant expense in the year the related products are sold best follows which accounting principle?

expense recognition

For the purpose of classifying liabilities as current or non-current, the term operating cycle refers to

the time period between purchase of merchandise and the conversion of this merchandise back to cash